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Top Democrat Proposes Annual Tax on Unrealized Capital Gains

posted by martyb on Sunday April 07 2019, @12:19AM   Printer-friendly

An Anonymous Coward writes:

April 2, 2019

Sen. Ron Wyden of Oregon, the ranking Democrat on the Senate Finance Committee, announced today that he would soon release a proposal to eliminate massive tax breaks enjoyed by the wealthy on their capital gains income. If successful, the proposal would ensure that income from wealth is taxed just like income from work.

His plan, which he has promised to flesh out in a white paper in the coming weeks, would tax the appreciation of assets owned by the very wealthy as income each year, an approach known as mark-to-market taxation. It would also subject that income to ordinary tax rates rather than special, lower income tax rates that apply to capital gains.

https://itep.org/sweeping-reform-would-tax-capital-gains-like-ordinary-income/
https://www.wsj.com/articles/top-democrat-proposes-annual-tax-on-unrealized-capital-gains-11554217383

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  • (Score: 0) by Anonymous Coward on Monday April 08 2019, @02:23AM (1 child)

    by Anonymous Coward on Monday April 08 2019, @02:23AM (#826041)

    In which case the owner never received any actual money from the "asset" - so what are you taxing?

    Is it possible to access the value of that asset without paying taxes against it? Like collateralizing a low interest loan against the value of the asset? Some searching suggests that this can be accomplished with a transfer-of-title loan (from this page [stocksloan.net]):

    The ownership of the shares is temporarily transferred to the Lender. The shares will be held in a custodial account at a major bank or major brokerage firm. Upon payment of the loan at maturity, ownership is transferred back to the borrower. This is a non taxable event and the borrower’s cost basis of the collateral does not change.

  • (Score: 2) by theluggage on Monday April 08 2019, @03:07PM

    by theluggage (1797) on Monday April 08 2019, @03:07PM (#826187)

    Is it possible to access the value of that asset without paying taxes against it? Like collateralizing a low interest loan against the value of the asset?

    Yes, that's the sort of thing I meant by 'opening doors'. But what sum are you proposing to tax? Lets say you bought shares for $1M, the value rose to $1.5M, and you then used that as collateral to get a loan at 1%. Your only "gain" will come from the difference between that 1% interest rate and some hypothetical, higher, rate that you might have got with only $1M in collateral. That's going to be impossible to calculate or police. If there's some way to exploit that mechanism to (effectively) cash in your shares without cashing them in then there has to be a bit more to it (I wouldn't be surprised - e.g. what happens if you default on the loan - if you can walk away, and the lender keeps the shares without CGT getting paid then, yes, you have a tax dodge)

    ...and, always remember before shaking down Richie Rich for some extra cash, this might also be the sort of thing that Mrs Miggins' pension fund manager does to manage their cashflow.